'RBI must enter forex market to support Rupee, curb inflation'

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The rupee will remain volatile till RBI recoups the forex reserves of USD 65 billion: Sen Gupta. (Reuters) The rupee will remain volatile till RBI recoups the forex reserves of USD 65 billion: Sen Gupta. (Reuters)
SummaryThe rupee will remain volatile till RBI recoups the forex reserves of USD 65 billion: Sen Gupta

rupee. As a result, the RBI had to buy forex during the up-cycle of 2004-07 to stop undue appreciation the report noted.

However, it notes that the situation changed dramatically after the Lehman crisis. Capital outflows began to pull down the rupee. In response, RBI had to sell dollars to prevent a run on the rupee in 2008 and end-2011.

But it also notes that RBI attempts propping up the rupee between the second half of of 2009 and first half of 2011 against imported inflation at the cost of buying forex, pulled down the import cover down to 1990s levels.

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